Denmark plans to stick with euro peg

Banks in Scandinavia are joining the Danish government in trying to persuade offshore investors that the Nordic country isn’t about to copy Switzerland and drop its euro peg.

SEB AB, the Nordic region’s largest currency trader, said it’s been fielding calls from hedge funds wondering whether Denmark might be next after the Swiss National Bank shocked markets by exiting a three-year-old euro cap on Jan. 15. Economy Minister Morten Oestergaard a day later sought to silence doubts surrounding Denmark’s currency peg, which he said remains “secure.”

Carl Hammer, chief currency strategist at SEB in Stockholm, says he’s been trying to make clear to callers that it’s “highly unlikely” Denmark will alter its exchange-rate regime.

Speculation Denmark may follow the SNB has forced bankers across Scandinavia to provide offshore investors with a crash course in Danish monetary policy. Hedge funds calling SEB, Danske Bank A/S and other Nordic banks have been urged to consider that Denmark’s peg has existed for more than three decades and is backed by the European Central Bank, unlike the SNB’s former regime.

“Obviously, we think it’s completely unrealistic” that Denmark will abandon its peg, Jan Stoerup Nielsen, an economist at Nordea Markets, said by phone. “But that doesn’t seem to be stopping the speculation.” (Bloomberg)